Tuesday, October 5, 2010


Oct 5, 2010

You can have your cake and eat it

By Cheong Suk-Wai

IF YOU want to set former Australian premier John Howard off, just suggest that the disadvantages of capitalism outweigh its benefits.

To that, Mr Howard, 71, says hotly, while gesticulating wildly to underscore his point: 'We've come a long way courtesy of globalisation and market capitalism. So it's a mistake to seek salvation in protectionism.'

Always one to tell it like it is, this cricket-crazy lawyer was Australia's 25th and longest-serving premier after Robert Menzies, holding the post from 1996 till 2007. He now chairs the International Democrat Union, a grouping of conservative political parties.

The married father of three was in town a fortnight ago to speak at the S. Rajaratnam School of International Studies' inaugural Singapore Global Dialogue. So I took the opportunity to ask him how his country was doing in the wake of the recent general election and how it should manage its ties between East and West:

The past few weeks have been rather eventful for Australia.

What do you think of the general election results?
Well, the most heartening thing for me is that the Liberal Party coalition under Tony Abbott has done so well. I'm disappointed that they did not win, but nobody really expected them to after Labor has had only one term and it's remarkable that they were so close. We now have a minority government for the first time in 70 years.

What's going to happen?
It's too hard to predict because it's so close and there are so many variables: there could be a by-election, a seat could change hands and make it 75-all, in which case they would almost certainly have to have another election. From the country's point of view, I don't think much is going to happen because the government doesn't have the capacity and is so dependent on the Greens, which is anti-economic reform.

What do you think Australia needs at this stage of its being?
Economically, it needs to continue the path that it's been on for a long time - that is, reform, remain competitive, understand the challenges of the global financial environment and stick to market capitalism.

How big a task is that now?
It's more difficult now. Under the Labor governments of Kevin Rudd and Julia Gillard, we've already seen a reversal of my government's labour market reforms. That reversal will take a while to work its way through the system but when it does, it will be quite costly for businesses.

What does that say of the robustness of your reforms?
Well, any reform can be undone.

Yes, depending on how strong and entrenched they are.
Let me amend that. Some reforms can't be undone because once some of the egg is scrambled, you can't unscramble it. For example, we're not going to regulate our exchange rate again, re-erect a tariff wall or reverse the Goods and Services Tax and go back to taxing income more steeply. But we needed another three years to entrench labour market changes.

Looking farther afield, why are Australians terrorist targets?
The terrorist threat's not gone, but Indonesia's done very well in being very vigilant and quite effective in removing a lot of the incentive for extremism... One of the big success stories in our region in the last 13 years has been Indonesia's transition from a military dictatorship to the world's third-largest democracy - and I don't think Indonesia receives as much credit for that as it deserves from the rest of the world, particularly from the Europeans and Americans.

Would the rise of Indonesia take the shine off Australia?
We're a Western culture with close links with Asia. People shouldn't get hung up about it.

Recently, Mr Rudd promoted the concept of an Asia-Pacific community.
Yeah, well, I thought that was a waste of effort.

Why so?
He should have endeavoured to make the existing institutions - including Asean, the Asia-Pacific Economic Cooperation (Apec) and the East Asia Summit - work more effectively. The idea that every new president or prime minister has to create a new structure with his name on it is silly.

Which among those institutions did you find most valuable?
I went to 12 Apec meetings and they were valuable because they brought together all the countries of our region plus the United States, Russia and some countries in South America. The key thing about making Apec work is keeping the Americans fully engaged; if you burden the region with yet another structure, Apec may wither on the vine. What also makes Apec valuable is that Asia is where the centre of economic gravity is shifting.

Perhaps Mr Rudd wanted Australia to lead in this power shift?
Yes, but you see what defines a leading role is not an international bureaucratic structure, but how you interact with countries in the region. Look at our relationship with China: it's our best export destination and we are still the most favoured overseas destination for Chinese students. That to me is far more valuable than some fanciful whizbang, grand slam international arrangement that will never deliver.

Why not?
Let me give you an example: the biggest single difficulty with the United Nations is that its Security Council has five veto-wielding countries, which reflects the power realities of 1945. The five countries with that authority are not going to give it up... But we've just got to work around that.

What have you found most effective in working around that?
Concentrate on things we share in common. With China, we have a great complementarity of economic interests but not a common philosophy. It's just a fact of life.

How can you do business with a country whose beliefs you can't stand?
Well, there are Chinese and there are Chinese...and I recognise that, over time, values in countries can change too. Japan was once very militaristic but is now a mature democracy.

How will Australia balance its Western and Eastern ties?
That assumes that there is a natural antagonism between the two. I don't think that's true... We should build on what is common but, equally, we should not apologise for who we are.

But how will Australia balance between the declining West and the rising East?
I spent my whole prime ministership arguing that Australia did not have to choose between her history and her geography. We can be faithful to both because there's no inevitable conflict. Take India, which is culturally so very different from Australia but we have a common British legacy, like the English language, our legal system and cricket.

So you think you can have your cake and eat it?
Well, you can. And we have. We've this magnificent trading relationship with China but haven't compromised our democratic system... As the old saying goes, 'You do not have permanent friends, you have permanent interests.'

Speaking of interests, why did Australians vote you out?
If you are prime minister of a democracy and with 24/7 news coverage, eventually people get tired of the government and they want a change. That happens in every society. It happened in Britain in 1997, when its economy was in very good shape but they wanted somebody new.

What does that say about democracy?
Well, as Winston Churchill famously said: 'Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.'

Lessons No. 1 and 2...

FORMER Australian premier John Howard is one who is always primed for a lively debate on things close to his heart - chiefly his country, capitalism and cricket. Here he is on:

Why Australians voted him out of office in 2007
'Well, in any democracy, people want change. But they do not necessarily change for the better. It's change for the worse!'

The disadvantages of globalisation
'How can you talk about disadvantages when there would be hundreds of millions of people in Asia poorer now than they are if they had not embraced market capitalism and globalisation. That's lesson No. 1.'

What Lesson No. 2 is.
'Don't go backwards and seek salvation in a whole lot of new international rules and regulations.'

His advice for leaders everywhere
'I'd never be so presumptuous as to give a piece of universal advice, but the observation I'd make is that we still live in a world of nation states and whilst we should collaborate, we should never believe that an international institution that's going to solve all our problems is just around the corner.'

The decline of the United States
'It hasn't happened and it won't. It will always be very powerful because it's big, very free, very innovative and it's not ageing the way European countries - or China - are.'

His successor Kevin Rudd's idea of an Asia-Pacific community
'It's ludicrous.'

How unrealistic the United Nations Security Council is today
'Do you think it's reasonable that a country like India or Japan doesn't have a veto? That there's no Islamic country that's got a veto?'


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